Strategy 1: Play by the Rules

Playing for rewards can be fun and profitable—but you’ve got to beware of traps that can wipe out your winnings. Follow these guidelines:

DO: pay your bill in full each month. A balance is the nemesis of a rewards strategy, since interest (usually 13% to 22% on this type of card) can eliminate the benefits, says Beverly Harzog, author of Confessions of a Credit Junkie. To avoid finance charges, some wizards budget to the penny; others pay off their cards weekly or after any big purchase.

DO: stay on top of due dates. Late fees—$34 on average, per CardHub.com—add up fast and may amount to more than what you’ll get back from the card.

DO: track annual fees. For some cards (like the American Express Blue Cash Preferred) it can make sense to pay a fee ($75), since the earn rate (6% on groceries) is so lucrative. But for cards you’re simply getting for the sign-up bonus, cancel your membership before the fee—usually waived in the first year­­—comes due.


 

DON’T: spread out your applications. Planning to get new cards to follow the strategies here? Complete all your applications within a two-day window, since that way only one inquiry will be recorded on your credit reports. If you instead apply over a few months, your report will show multiple inquiries, which can damage your credit score.

DON’T: use too much credit. The wizards charge everything. If you’re going to follow their lead, keep in mind that 30% of your credit score is determined by how much of your credit limit you spend. Experts recommend using less than 20% to 30%. One benefit of signing up for multiple cards is that by combining them you have a higher overall credit limit.

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